By Nathan Garrett & Lucinda Luetkemeyer

On September 15, 2022, the U.S. Department of Justice (DOJ) announced significant revisions to the Department of Justice’s corporate criminal enforcement policies and practices. The DOJ’s new initiatives, announced in a formal memo and speech by United States Deputy Attorney General Lisa Monaco, are designed to strengthen oversight of corporate compliance and enforcement. The new guidance, known as the “Monaco Memo,” includes a host of recommended best practices for corporations to consider and provides a roadmap for how federal prosecutors will treat corporations in the throes of an investigation or criminal prosecution. With this updated set of policies, the Department emphasizes for companies the importance of compliance efforts, self-disclosure and cooperation, ethical corporate culture, and early reporting of incriminating documents or culpable individuals.

Holding Individuals Accountable. The Monaco Memo emphasizes that the DOJ’s “first priority” in addressing corporate crime is to “hold accountable the individuals who commit and profit from corporate crime.” This is consistent with the Department’s long-standing approach, but the new guidance provides greater incentives for corporations to self-disclose and report misconduct by individual employees in a timely manner. To that end, the DOJ introduces the following revised policies:

• To receive any cooperation credit from the DOJ, corporations must disclose all “relevant, non-privileged facts about individual misconduct. This disclosure should not just be cursory — corporations must produce on a “timely basis” all relevant and non-privileged facts and evidence about individual misconduct in order to receive full cooperation.
• Should the government identify “undue or intentional delay in the production of information or documents,” the DOJ will reduce or eliminate cooperation credit.

Dealing with a History of Corporate Misconduct. The new guidance states that the DOJ will consider, among other things, the company’s record of past misconduct, including prior civil, criminal, and regulatory resolutions, both U.S. and foreign-based, but that not all instances of prior misconduct are “equally relevant or probative.” The DOJ will focus on recent U.S. criminal resolutions and prior misbehavior involving the same individuals or managers.

“Corporate culture matters,” Deputy AG Monaco said. “A corporate culture that fails to hold individuals accountable, or fails to invest in compliance — or worse, that thumbs its nose at compliance — leads to bad results. While the priority remains individual accountability, where appropriate, we will not hesitate to hold companies accountable.”

In addition,

• The DOJ will examine whether the actions at issue “reflect broader weaknesses” in corporate culture or compliance; in doing so, the government will consider if the earlier misconduct was based on the same underlying causes and if the company took steps to remediate the problems.
• The DOJ will disfavor multiple deferred prosecution or non-prosecution agreements, particularly where they involve similar kinds of misconduct or overlapping personnel or entities — this is a signal to recidivist corporations that successive negotiated resolutions short of prosecution may not be offered as in prior years.

“It will no longer be sufficient for companies to limit disclosures to those they assess to be ‘substantially involved’ in the misconduct,” Monaco said, adding that such distinctions are “confusing in practice and afford companies too much discretion in deciding who should and should not be disclosed to the government.”

Under this new guidance, the DOJ is emphasizing that “all prior misconduct needs to be evaluated when it comes to decisions about the proper resolution with a company, whether or not that misconduct is similar to the conduct at issue in a particular investigation,” Monaco said.

Importance of Early, Voluntary Self-Disclosure. The DOJ stressed the importance of incentivizing companies to self-report any misconduct to the DOJ. Under the Monaco Memo, each DOJ division will be required to adopt a formal, documented policy explaining the benefits provided for voluntary self-disclosure. Unless there are aggravating factors, such as where an act poses a grave threat to U.S. national security or where the offending act is deeply pervasive throughout the company, the DOJ will not seek a guilty plea if a corporation has voluntarily self-disclosed, timely and appropriately addressed the criminal conduct, and fully cooperated with prosecutors.

Effective Compliance and Deterrence Efforts. The DOJ Memo emphasized that the DOJ would evaluate a company’s compliance program based on what has been put into action, not merely what has been written down. The DOJ announced two new key factors in assessing the effectiveness of compliance programs: The first new factor the DOJ pledges to assess is whether a company’s compensation system actually penalizes criminal conduct and rewards compliance, such as by using clawback provisions or other contractual penalties that allow a company to reduce an executive’s compensation in the event of misconduct. The second new factor is how a company approaches the issue of employees’ use of third-party messaging apps for business-related communications, as well as personal devices. The DOJ will inquire whether the company took steps to preserve and produce all relevant communications.

To receive full cooperation credit for compliance, companies should review their compliance program regularly to be sure there are policies enacted to effectively deter individual misconduct. Corporations should also demonstrate that they have taken concrete steps to equip their compliance officers with the necessary resources and support to consistently enhance their compliance programs.

Takeaways. The revisions to the DOJ’s existing enforcement policies mean corporations should (1) actively review their compliance programs to ensure they sufficiently monitor for and address misconduct; (2) enact policies to penalize wrongdoers and preserve and produce communications by employees on personal devices; (3) identify all individuals involved in misconduct when it comes time to cooperate, including producing all non-privileged information about those employees’ involvement; and finally, (4) recognize that their entire civil, regulatory, and criminal record will be reviewed by the Department, even prior misconduct that is adjacent or unrelated to the conduct at issue.

Taking these concrete steps will go a long way toward preventing or mitigating the impact of future investigations and enhancing corporations’ leverage in negotiating resolutions.

We will continue to monitor the DOJ’s public statements and implementation of these new revised policies. Graves Garrett LLC is available to craft and revise corporate compliance plans, update training and companywide policies, and conduct internal investigations.

Nathan Garrett and Lucinda Luetkemeyer are partners in Graves Garrett’s White Collar Criminal Defense & Government Investigations practice, where they represent clients facing investigations pending before the Department of Justice and other government agencies.